Tag: PE/VC Investments

I was going to be writing about yesterday’s #FlipMyFunnel conference keynote given by Terminus CEO Sangram Vajre this morning, but I woke up to news that Dun & Bradstreet is being taken private. So, I’ll recap Vajre’s discussion of humanizing B2B and the need for authenticity in a later post.

Dun & Bradstreet announced that it will be taken private by CC Capital, Cannae Holdings, and funds affiliated with Thomas H. Lee Partners LP, for $5.38 billion in cash. Shareholders will receive $145 per share, an 18% premium over its Wednesday close. The acquisition includes $1.5 billion in assumed debt.

The deal is subject to shareholder approval and is expected to close within six months.

Dun & Bradstreet has a venerable history going back 177 years. Employees include several future nineteenth century Presidents. The firm, however, has struggled in recent years to grow revenues, particularly in its Risk Management Solutions group. Sales & Marketing Solutions, which makes up a bit over 40% of the company, has posted slow but steady growth.

Dun & Bradstreet has some market leading assets:

The D-U-N-S number is the de facto global numbering system for companies. It is often required for loans and is necessary for bidding on US government contracts.

D&B Hoovers (FKA Avention) continues to improve with the addition of the WorldBase file, First Research industry overviews, and Global Company Authority file to the Sales Acceleration platform.

Digital delivery solutions include the D&B Direct API, connectors for CRM and Marketing Automation platforms, B2B programmatic marketing, and visitor ID (the mapping of anonymous website visitors to their firm).

The company has a strong data foundation and has been shifting delivery of its product line to the cloud, but its sales and marketing products have not had significant growth. Instead, Dun & Bradstreet has seen companies such as DiscoverOrg, LinkedIn (Sales Navigator), TechTarget, and Zoominfo enjoy most of the growth in the Sales and Marketing Intelligence space.

Funding will be a combination of debt and equity. The deal includes a 45-day “go-shop” period during which alternative offers will be welcome.

Thomas J. Manning will continue as the CEO through the closing of the transaction while James N. Fernandez, a director of the Company since 2004 and Lead Director since February 2018, will continue as the Chairman.

“Today’s announcement is the culmination of a thoughtful and comprehensive review of the value creation opportunities available to the Company as part of a full portfolio and business assessment and exploration of strategic alternatives with multiple financial sponsors. As a result of this process, the Dun & Bradstreet Board of Directors unanimously determined that this all-cash transaction with the Investor Group is in the best interest of our shareholders and our Company,” said Manning.

William P. Foley II, Chairman of Cannae Holdings, said, “In an increasingly data-driven world, Dun & Bradstreet’s insight-driven business model and interconnectivity across industries has positioned the Company for continued success. We are excited to grow the Company, increase operating efficiencies and improve the Dun & Bradstreet customer experience by providing enhanced business solutions.”

Customer engagement platform Outreach announced a $65 million Series D last week, bringing its total funding to $125 million. The round was led by Spark Capital and includes investment from Sapphire Ventures as well as from existing investors DFJ Growth, Four Rivers Group, Mayfield, MHS Capital, Microsoft Ventures and Trinity Ventures.

Business Insider placed the valuation around $500 million, more than double the Series C valuation. The firm is eyeing an IPO in 2021 subject to market conditions.

Funds will be deployed towards product development “with a specific focus on machine learning and extending the platform beyond the sales team to every customer-facing role.”

Outreach rolled out the first application of its Amplify AI platform in March for intent classification. “This feature detects the intent of an email reply from a prospect and uses that intent to automate or recommend the next best action for the sales rep to take,” blogged product storyteller Chelsey Feldman. “Our intent classification capabilities use Natural Language Processing (NLP) to go beyond reply rates and measure whether replies are positive, objections, or unsubscribe requests…The result is the ability to measure email effectiveness and classify intent at scale.”

The firm now describes itself as a Customer Engagement company that is employing machine learning “to scientifically test, measure and optimize the performance of sales teams, while also automating non sales-related tasks.”

Medina blogged about this broader company vision last week:

Our mission is to help innovators, the evangelists of new technologies who face a lot of no’s before reaching the yes, to get their products to the people who need them, to successfully build new markets, and to fund the cycle of continuous innovation. For the past couple of years we delivered against that mission by equipping sales reps and leaders to drive predictable and measurable growth, to increase efficiency and effectiveness across the team, and to improve visibility into sales activities and team performance. We pioneered a new category of technology – the Sales Engagement Platform – that drove significant bottom line results for our customers.

But achieving revenue efficiency and delivering a world-class experience to every customer is the job not just of your sales team, but of every customer-facing employee. Many of our customers have already realized the power of Outreach to drive efficiency and lift across the revenue organization and are using Outreach for account management and customer success in addition to pipeline generation and closing. The category has effectively grown beyond Sales Engagement to become Customer Engagement…

You can only make smart decisions around improving customer experience if you can measure the outcomes of every process for all customer scenarios, and understand how those outcomes directly impact revenue. The next revolution in business will be driven not by big bang AI programs that produce lofty recommendations that are difficult to put into action, but by stacking thousands of these quick wins on top of each other to drive efficiency into every corner of the business.

“Outreach has been instrumental in creating and evolving the customer engagement category, which is growing at an exponential rate,” said Alex Clayton, Investor at Spark Capital. “Outreach’s technology, approach and leadership team make it poised to capture this multi-billion dollar opportunity.”

The Series D follows after a strong 2017 where the company doubled its customer base and posted more than 100% revenue growth. Outreach also doubled its headcount over the past year to 300 employees with a goal of 350 by the end of the year. The firm has 22,000 global users and 2,400 customers including Cloudera, Adobe, Microsoft, and DocuSign.

“The customer engagement category is experiencing explosive growth, due in large part to high rates of usage, a rarity for enterprise software which is often used as a data repository or even worse, purchased and forgotten,” said CEO Manny Medina. “Our north star isn’t number of customers, it’s number of Weekly Active Users. This metric is proof we have created a technology that not only drives revenue, but also is viewed as indispensable to every member of the revenue team.”

Usage remains high with 75% of sales reps signing in daily. “Now salespeople have a place to live,” Medina said.

Atlanta sales engagement vendor SalesLoft received $50 million in Series C funding this week, bringing their total funding to $75 million. Insight Venture Partners led the round and was joined by Emergence Capital, which had participated in previous rounds, and LinkedIn. Funds will be deployed to add another 200 employees in Atlanta, San Francisco, New York, and Europe.

While the market value was not disclosed, the Atlanta Business Chronicle reported the valuation at more that $200 million.

“Things have gotten very noisy for buyers these days. They are bombarded with sales activity via phone, email, social, and many other channels,” said CEO Kyle Porter. “When buyers are able to peel away from those distractions, they still have problems to solve — and an overwhelming range of solutions to sift through. Now more than ever, buyers really need sellers who can rise above all this noise and provide them with a better sales experience — through our product innovation and our people, it’s our mission to help sellers do just that.”

SalesLoft will soon be releasing its SalesLoft Assist artificial intelligence module “which is informed by more than 500 million sales interactions, providing users with dynamic and real-time suggestions.” The firm is also looking to expand its development and partner network. The recently launched app partner directory already supports thirty partner solutions.

“SalesLoft is one of the most innovative companies in the sales engagement category and a leading provider on the Sales Navigator Application Platform. SalesLoft has integrated Sales Navigator into their application in a way that provides great user value while protecting LinkedIn member data. We look forward to working with SalesLoft to create even more value for our joint customers in the future.”

Doug Camplejohn, VP of Product, Sales Solutions, LinkedIn

“We didn’t create the sales engagement category; our customers did,” noted Porter. “They weren’t satisfied with the tools their teams had to connect and engage buyers. They made their needs clear, and we listened. As a result, sales engagement has evolved from a point solution to the system of record for sales organizations. Users are spending more time within SalesLoft than any other technology, including their CRM. Our customers are leading the way in this exciting new category, which is really just a reflection of their efforts to serve their customers in new, authentic ways.

DiscoverOrg has rolled out a broad set of partner integrations for CRMs, MAPs, Sales Development (ABSD) platforms, and Applicant Tracking Systems.

The Carlyle Group, a global alternative asset manager, has taken a minority investment stake in DiscoverOrg. 22C also participated in the round. TA Associates maintains a “significant equity stake” in the sales and marketing intelligence company with TA Associates and executive management retaining majority control.

“The DiscoverOrg team has built the industry-leading intelligence platform for sales and marketing teams across the globe. Consistent revenue generation requires accurate and actionable data, and that is what DiscoverOrg delivers. We are delighted to partner with the management team to accelerate growth and foster innovation.”

Patrick McCarter, Co-Head of U.S. Buyout Technology, Media & Telecom and Managing Director, The Carlyle Group

Randall Winn, 22C Capital Managing Member and former CEO of Capital IQ, noted, “We are exceptionally pleased to have been involved in DiscoverOrg’s success over the last few years as the team has built a truly unique data platform and developed into a world-class company. We are excited to be in a position to continue to work with DiscoverOrg and invest in [CEO] Henry [Schuck]’s vision.”

Funds will be used to accelerate database growth and the pace of product innovation. The money is non-restricted in its purpose “other than capturing our market opportunity more quickly,” said Chief Growth Officer Katie Bullard.

DiscoverOrg is coming off of another strong year of growth in revenue (ARR above $130 million), database coverage (124% increase in contacts), and employment (50% growth and the acquisition of RainKing). The firm has grown to 470 employees with 35 job postings on their website. According to Bullard, the firm is on pace to hit $160 million in revenue this year.

While Schuck has previously discussed an IPO, there have been “no specific conversations” concerning going public since, said Bullard.

Predictive Analytics and Audience Management vendor Leadspace completed its Series C. The funding round was led by Arrowroot Capital and joined by JVP. The $21 million round will be used “to grow our customer team in San Francisco and Denver, and our AI and data management product teams in Israel.”

The firm is assessing additional locations, including possible offices on the East Coast and Europe, “perhaps” London.

Arrowroot has taken a seat on Leadspace’s Board. The firm wanted growth equity advisors instead of traditional VCs for Round C. “At this point the investment is not just in the idea and the team, but also the underlying metrics and performance of the business,” said CEO Doug Bewsher. “Once you have “Product/Market fit”, the kinds of questions investors ask are whether you are ready to scale; what are the opportunities for further growth; and apart from additional investment can we be an investment partner that can help you address these opportunities?”

Bewsher noted that marketing has been transformed over the past seven years since Leadspace was founded. Firms are switching from tactical demand generation programs to targeted Account Based Marketing (ABM) communications. “No longer is it OK to just send out blanket “nurture” emails to everyone and hope that will generate positive customer engagements. No longer can you rely on a single data source as the basis to know your customer. No longer is it enough for marketers to just think of leads — they need to market to accounts, and teams of people. Neither can marketers afford to ignore intelligence and information from external parties, and simply rely on the limited info they gather internally.”

Not only has the nature of B2B marketing been transformed, but “world class B2B sales and marketing organizations” need to become more like consumer companies with a deep understanding of the account at multiple levels. Echoing Sirius Decisions, Bewsher said that B2B marketers need to “really know your customer at the account, demand unit and individual level, and then target and personalize your messaging to cut through the noise. And think customer-first.”

As an analytics company, Bewsher talks up the value of AI for sales and marketing as it begins to address specific problems and workflows:

AI is everywhere. While there is no doubt that it is going to change every corner of our life, both as private users and business people, I think we will start to move from the promise to the reality in 2018. In business-to-business sales and marketing in 2017, it was enough to say: “We have a ton of great data scientists who are working on new ways to better engage your customers.”

But in 2018 customers will look to see actual results — like the 90 percent increase in email connection rates we have seen from the deployment of AI to recommend the right way to engage a specific user. This will require a maniacal focus on specific use cases from the emerging area of AI.

One area where AI will improve revenue generation effectiveness is in ABM programs which has been limited by the human ability to consume information and the historical lack of data availability. However, “AI is changing all this, with the ability to consume and understand unprecedented amounts of information and turn this into action at scale and in real time. So sales and marketing teams now have the opportunity to drive much more relevant and effective engagement programs for their entire potential target audience.”

According to Leadspace, they are trusted by over 130 B2B brands and seven of the top ten enterprise software companies. Clients include Microsoft, Marketo, Oracle, and RingCentral.

British sales intelligence vendor Artesian Solutions announced that it received £3.5M in expansion capital from Columbia Lake partners. The funds will be used to refinance current debt obligations and provide working capital for “further growth and expansion.” The refinancing also provides better terms and business flexibility after the firm reached a profitability milestone in July.

Artesian has begun integrating artificial intelligence into its tools. Earlier this year, it launched Insight Agent, “the first step in a series of intelligent chat bots aimed at automating many of the tasks carried out by B2B professionals” along with Arti, the firm’s interactive digital assistant.

“This is an exciting milestone in our company’s history and positively reinforces the leadership position we have attained. We are constantly looking at the ‘what next’ scenario, pushing boundaries to establish our business as one of the leading innovators in B2B software for commercial teams, this has paved the way for our new risk mitigation capabilities which will be released in the New Year.”

Artesian Solutions CEO Andrew Yates

The firm has recently shifted its positioning from social selling to “A.I. powered sales intelligence.”

“Social Selling sits at the heart of Artesian’s founding principles,” explained Yates. “But as sales best practice has evolved, so has Artesian. Our goal is to be at the forefront of technology evolution for enterprise B2B, delivering a suite of A.I.-powered tools to make prospecting, engaging and closing deals easier. As our forthcoming risk mitigation capabilities demonstrate, we will continue to evolve to ensure we remain a trusted partner of our enterprise customers and to maximise the impact of their business relationships”

Venture Capital and Private Equity firms place a higher valuation on companies with recurring revenues. In Q1, software companies with a SaaS model received multiples of seven times revenue while other software companies received a multiple of 6.1.

“Any firm with recurring revenue is extremely attractive to investors,” said Rohit Kulkarni, head of research at SharesPost. “The subscription model translates to greater visibility of revenues, less volatility.”

According to PitchBook Data, Software-as-a-Service deals grew 217% between 2010 and 2016.

“SaaS is a more predictable and reliable revenue stream than if you had to go out and sell the software — the perpetual license model,” said Peter Fair, managing director at Golub Capital LLC.

Michael Larsen of Cambridge Associates said that SaaS models provide a “better measuring stick” as “these companies are moving toward more attractive, more readily transparent ways of selling products and they have attractive, meaningfully recurring revenues.” Employing a SaaS model does not prevent firms from failing but “it creates a more intensely analytical and measurable way of determining how a company is doing.”

For example, subscription firms that employ discounted offers to lure new customers may suffer from churn and see their business model unravel quickly. Subscription length needs to be carefully factored into valuing a firm and estimating its viability.